Will ‘accountable care’ work for you?

A new wrinkle for Medicare and health-care reform

First, we had the HMO. Then came the PPO. These days, health care experts are buzzing about the ACO. That stands for accountable care organization, for those who haven’t yet heard about this small but growing concept. And if that describes you, it’s time to bone up, since there might be one coming soon to a doctor’s office near you.

Like many changes going on in health care these days, ACOs are part of the Affordable Care Act, which creates incentives to encourage their wider use. The law included them in an effort to improve the treatment received by Medicare beneficiaries while also reducing costs. (Don’t stop reading if you’re under 65: many accountable care organizations also treat younger people who have commercial insurance.)

Accountable care organizations are groups of providers—they could be any combination of doctors’ practices and hospitals—that have a financial incentive to provide more efficient care. Currently, an estimated 8% of Medicare beneficiaries are served by more than 250 accountable care organizations participating in the program run by the Centers for Medicare & Medicaid Services. (The 8% includes only those in traditional Medicare; Medicare Advantage is already structured in a way similar, but not identical, to the ACOs.)

TAXES

Big tax bills can devastate your retirement
savings. MarketWatch's Robert Powell and Andrea Coombes talk about strategies to employ before and during retirement to lower your taxes.

Medicare continues to solicit new applicants for the ACO program, and officials expect the numbers of participants to grow. If ACOs take root there, they could potentially affect not just the millions of older Americans on Medicare, but the customers of any private insurers who might follow the government’s example.

Rewarding quality, not quantity

Under the current reimbursement system, insurance companies typically reward doctors for doing more to—but not necessarily for—their patients. Most doctors are essentially paid on a per-procedure basis, rather than based on their results: If they do more procedures, doctors get more money, with no bonus if patients stay well. By contrast, ACOs try to reward better health results: if ACOs deliver better outcomes, such as reducing their patients’ hospital admissions and readmissions, then Medicare will send the ACOs a portion of the money saved as a result. “In an ACO, you have every incentive to keep a patient out of the hospital, while in a traditional fee-for-service model, you have every financial incentive to see a patient in the hospital,” said Dan Mendelson, CEO of Avalere Health, a Washington, D.C.-based advisory firm.

So what do these changes look like from the patient’s point of view? For one, patients in an ACO should enjoy increased coordination among all their doctors. Primary care doctors lie at the heart of each ACO, which has a relationship with an array of specialists. As the “quarterbacks” calling the plays for their patients’ treatment, primary-care doctors can generally be involved in just one ACO, said Warren Skea, director in PwC Health Industries Advisory. In larger networks, specialists may also be exclusive to the ACO. Smaller networks might not serve enough patients to have, say, a gastroenterologist exclusive to them, so in some cases a specialist may be involved in more than one ACO.

Time-pressed doctors often fail to communicate with one another about the care given to shared patients. So an ACO creates a kind of team that some refer to as the patient’s “medical home,” where a primary care quarterback coordinates care among all the doctors. This decreases the risk of duplicated tests, unwanted drug interactions, and other potentially costly and dangerous problems.

Some doctors worry that this approach could lead to the kind of inflexibility that characterized many HMOs, where patients and doctors alike often found treatment options limited by what critics called a complex bureaucracy. But supporters say that the ACO model is less about saying “no” than about better tracking a patient’s care. An ACO’s success relies largely on the use of electronic records to facilitate communication among all these doctors, experts say. Improved communication reduces duplication and cuts costs. For example, if your cardiologist knows that your primary care doctor already ordered an EKG, then she wouldn’t need to perform one herself. According to some estimates, as much as one-third of the country’s $2.7 trillion in annual health-care spending is wasteful. (One note: Medicare part D is not affected by ACOs, so patients won’t be forced to reduce their prescription drug use.)

ACO patients might also enjoy more time with their doctors, said Robert Williams, director of Deloitte’s life sciences and health-care consulting practice. ACO’s shared-savings structure puts more emphasis on prevention and wellness. One big cause of hospital admission is congestive heart failure. An ACO doctor might take an extra few minutes to talk to patients about the importance of reducing salt consumption and taking all medications to manage their condition, Williams said.

Concerns about communication

Patients can travel outside their ACO to see a specialist if they choose. However, if the ACOs don’t communicate well with one another or with doctors who are unaffiliated with an ACO, then it will be harder to achieve systemwide savings and efficiencies, said Steve Parente, professor of health finance at the University of Minnesota. You could have “Health Care Castle A, Health Care Castle B, and Health Care Castle C,” which do a great job of communicating internally but don’t talk well with one another, Parente noted. What’s more, a fragmented system won’t benefit snowbirds and others who split their time between different locations. In other words, if your endocrinologist in New York doesn’t know that your endocrinologist in Florida changed your diabetes medication over the winter, then what’s the point? (While some ACOs span different states and regions, most of those participating so far are more localized.)

Medicare’s ACO program is voluntary. Doctors, hospitals, and larger health systems can choose whether to apply to join the program. These ACOs generally serve patients of all ages. Patients with commercial insurance will typically get the benefits of participating in an ACO even though their insurer doesn’t share savings with their doctor. Some private insurers, such as Blue Cross and Blue Shield of Illinois, are adopting an ACO model in conjunction with physicians, although for now such groups remain the minority.

Participation in ACOs is voluntary for patients as well. Not only can patients continue to see any doctor they like, they can also opt out of data sharing if their primary care doctor participates in an ACO. (Whether they stay inside the ACO or go outside for a specialist, patients still pay the same premiums and coinsurance.) Most doctors agree that patients get better care if their doctors are aware of the treatment they’re getting from other physicians. But some patients might be sensitive about certain information—say, antidepressant use—and might not want to divulge that to every doctor. Medicare patients with concerns about electronic record-keeping can call 1-800-MEDICARE (1-800-633-4227) to opt out of the data sharing while remaining with their current physician.

Experts say the ACO system could represent the beginning of a shift away from a fee-for-service system toward one where insurers reimburse doctors in lump sums, either for a care episode—such as the treatment of an acute illness—or for a fixed amount of time. Today’s ACOs generally layer shared savings onto a system that still pays per test or procedure. In a few years, we could see much less of this fee-for-service model, experts predict.

“It takes a village to build these systems,” said Williams, the Deloitte health-care specialist. “Everyone’s trying to figure out how they can adjust to this change and collaborate in ways they haven’t before.”

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.